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June 23, 2007

Health Insurance: Not Like Car Insurance

By Neil the Ethical Werewolf

In the course of being demolished by Ezra on his show this week, Larry Kudlow tried to bolster the case for private health insurance by mentioning that we have a reasonably successful private car insurance system.

Among the disanalogies between the two kinds of insurance is that it's not such a big deal if insurance costs cause people to forgo owning cars.  Insurance is among the many hassles and expenses that caused me to opt out of car ownership.  Instead, I pay up to live within walking distance of campus.  Obviously, I'm lucky to have this option.  But in my case, it's the way markets are supposed to work -- prices create incentives for efficient behavior. 

But no matter how healthy you live, you can't opt out of being subject to a sudden medical catastrophe.  And the massive non-financial costs of medical catastrophe will provide strong incentives to avoid it, whether you have insurance or not.  Here's a situation where everybody needs something, and prices don't incentivize a lot of efficient individual behavior.  So the case for a government system guaranteeing universal coverage is a lot stronger. 

June 23, 2007 | Permalink

Comments

But no matter how healthy you live, you can't opt out of being subject to a sudden medical catastrophe.

There is no macro-level data suggesting that people without insurance don't have access to care in cases of medical catastrophe. By law, all hospitals must admit patients in these situations. Its the non-emergent and chronic care which is difficult to access-- leading to a greater need to catastrophic care in the long-run.

There are other good thoughts on differences between car insurance and health insurance, but this post wasn't one of them.

Posted by: wisewon | Jun 23, 2007 8:08:28 PM

Another point, you could switch the word "home" for "health" as in home insurance, and the rest of the post would make sense-- up until the point you claim the need for government guaranteeing universal coverage. We don't have that for people's homes, and the impact is roughly at the same level.

Bad post, everything considered.

Posted by: wisewon | Jun 23, 2007 8:13:28 PM

1. Even if they can get care, the insurance keeps them from going bankrupt. The fact that they have sufficient non-financial incentives to avoid medical catastrophe doesn't mean that they don't need to be insured against the financial risks. And if the argument goes forward just fine with 'catastrophe' replaced by 'sudden onset of a chronic condition', I'm happy to take that and run with it.

2. As a renter, I've opted out of homeownership too. So homeownership falls on the car side, not the health side.

Posted by: Neil the Ethical Werewolf | Jun 23, 2007 8:18:31 PM

wisewon is correct that if a patient presents to an ER with a medical catastrophe they will receive treatment.

However, what about preventing the catastrophe? Often catastrophes are caused by lack of preventative care, and lack of routine care of chronic diseases. Those without insurance lack access to these.

Plus, as Neil points out, they may receive the care, but then be forced into bankruptcy. This also includes many people who have insurance but are underinsured.

Everything considered, good post, not so good comment.

Posted by: Ron Chusid | Jun 23, 2007 8:25:43 PM

On 1-- all fair points-- but not what you said in the original post.

On 2-- Silly distinction. So government needs to guarantee insurance coverage for homeowners? (Or do you want to claim that government has less interest in promoting home ownership than they do promoting people's health?)

Also, you haven't opted out homeownership-- you're 25 years old, plus or minus 3 years or so. Grow up a little, make a little money for a down payment, have a family-- if you're still renting, we'll then call it "opt out." Until that point, you haven't reach a point in life where you've really opted out anymore than a teenager.

Posted by: wisewon | Jun 23, 2007 8:27:04 PM

Ron--

As I just said-- all of your points make sense-- none of them were stated in the original post-- they were in Neil's comments.

So not a good post.

Posted by: wisewon | Jun 23, 2007 8:28:32 PM

Werewolf,

Your post is thoroughly confused. You are conflating the issues of funding (public or private) and coverage (partial or universal). Universal coverage can be provided under either type of funding. So even if your argument for universal coverage were valid, it would not mean that the funding must be provided by the government.

But your argument isn't valid anyway. There are many kinds of "sudden catastrophe" that people can suffer, not just a catastrophic medical problem, that could put them into serious debt. Their house could burn down. They could lose their job. Their husband could die or abandon them. They could become permanently and seriously disabled. We don't provide a government-run insurance system to protect people from the costs of these catastrophes. So why should we provide a government-run insurance system to protect people from the costs of a medical catastrophe?

Posted by: JasonR | Jun 23, 2007 8:34:45 PM

Werewolf,

1. Even if they can get care, the insurance keeps them from going bankrupt.

Nonsense. Are you seriously under the impression that people in countries with "universal health care" never go bankrupt due to medical catastrophes? Of course they do. At most, universal coverage might reduce the rate of medically-related bankruptcy, but it most definitely would not eliminate the problem. When a medical problem causes someone to become bankrupt, the most common reason is loss of income resulting from the illness. They have to take time off work, or they lose their job. This can cause them to go into debt to cover ordinary living expenses, especially if their financial situation was precarious even before they got sick. Medical bills may contribute to the debt, but they are rarely the biggest factor.

Posted by: JasonR | Jun 23, 2007 8:43:00 PM

However, what about preventing the catastrophe? Often catastrophes are caused by lack of preventative care, and lack of routine care of chronic diseases. Those without insurance lack access to these.

Not true. Everyone has the right to free or nominally-priced primary health care services, which includes preventive care and routine care for chronic diseases, at the hundreds of Community Health Centers funded by the Bureau of Primary Health Care. In addition, there are other sources of primary care for the indigent and uninsured provided by state and local governments and by private hospitals and health centers. Also, a large proportion of the people who are eligible for Medicaid are not enrolled. This suggests that the problem is less one of "access" to health care services than of persuading poor and uninsured people to make better use of the services that are already available to them.

Posted by: JasonR | Jun 23, 2007 8:58:02 PM

wisewon is correct that if a patient presents to an ER with a medical catastrophe they will receive treatment.

The sign at Oregon Health & Sciences University Hospital and Clinics says: You will receive car only to stabilize the condition - as the federal law specifies. It doesn't say you will be treated as a full-care patient. And you won't.

Posted by: JimPortlandOR | Jun 23, 2007 8:58:11 PM

Also, you haven't opted out homeownership-- you're 25 years old, plus or minus 3 years or so. Grow up a little, make a little money for a down payment, have a family-- if you're still renting, we'll then call it "opt out." Until that point, you haven't reach a point in life where you've really opted out anymore than a teenager.

I don't think he meant opting out in the sense of purposely and defiantly refusing to own a home; I took his point to be (Neil of course please correct me if I'm wrong) that you can, in fact, be just fine without owning a home in a way you can't be just fine if you don't have health insurance.

Granted, my perspective may be skewed because as a not ridiculously wealthy NYC resident who plans to stay here for a very long time if not necessarily till I die, there is a good chance I will in fact be renting forever, as several middle-aged-with-children people I know are (like, well, all my friends' parents).

Also, I always thought that the reason health insurance was unlike car insurance was because without a car, you have to stick to alternate transportation, but without health care, you could, you know, DIE. Is this not a reason to say that the analogy is inadequate?

Posted by: Isabel | Jun 23, 2007 9:04:46 PM

> wisewon is correct that if a patient presents
> to an ER with a medical catastrophe they will
> receive treatment.

Well, they will keep the victim alive for the moment anyway. They might give him a basic level of care. But any substantial or rehabilitative care? No.

A guy I know was out riding his bike early one Saturday morning. As usual he didn't have his wallet because it was a pain (somewhat ironic). He doesn't remember what happened, but the police think he lost focus and rode directly into a parked car. In any case he was found unconscious in the street with severe facial wounds. There were 5 university medical centers within easy driving distance; he was taken to the local indigent hospital and deposited in the emergency room. He family finally found him on Sunday evening. He had not been seen by either a brain specialist or a facial surgeon, as the indigent hospital's specialists did not work on weekends. By the time his family got him transferred to a top-rank hospital on Monday some of the facial damage was irreparable. Luckily there was no permanent brain damage.

Cranky

Posted by: Cranky Observer | Jun 23, 2007 9:10:45 PM

Are you seriously under the impression that people in countries with "universal health care" never go bankrupt due to medical catastrophes?

Ah, the wonders of 'never' in bullshit arguments. In JasonR World, that a country has one medical-related bankruptcy is exactly the same as the US, where half of all personal bankruptcies are explicitly on account of medical bills.

Everyone has the right to free or nominally-priced primary health care services, which includes preventive care and routine care for chronic diseases, at the hundreds of Community Health Centers funded by the Bureau of Primary Health Care.

Ah, yet more of JasonR's Fantasy Healthcare System, which works wonderfully in the abstract, but gets a bit hazy outside his imagination.

And so we see the two prongs: bullshit conflation and bullshit abstraction. See, no real-world system stands up to the test of JasonR's Fantasy System, and thus the actual US system triumphs, even though it bears little relationship to the Platonic ideal in his head. After all, comparing the system as implemented to the one in his head is just arguing from anecdote.

An example:

JasonR: Everyone has the right to free care.
Everyone: Yeah, but it's shit, hard to find, and in emergencies is limited to stabilizing your condition.
JasonR: Ha! I win through the power of pure crystalline abstraction.

Posted by: pseudonymous in nc | Jun 23, 2007 9:42:37 PM

Uhm- does this person live in NYC? You don't need a car here. But you do need health insurance.

Posted by: akaison | Jun 23, 2007 9:50:41 PM

pseudo,

where half of all personal bankruptcies are explicitly on account of medical bills.

Do please show me your proof of this claim. Also, show me the rates of personal bankruptcy on account of medical bills in Britain, Canada, and France.

Ah, yet more of JasonR's Fantasy Healthcare System

No, Community Health Centers really do exist. They really do provide health care services for free or for a nominal fee to the poor and uninsured. You would know this if you had the slightest clue what you were talking about.

Posted by: JasonR | Jun 23, 2007 9:53:49 PM

Akaison: heh, word. Again, most of my city-dwelling friends' parents have never in their lives owned a home or a car. These thngs are not always necessary. Health insurance is.

Posted by: Isabel | Jun 23, 2007 9:57:41 PM

Everyone has the right to free or nominally-priced primary health care services, which includes preventive care and routine care for chronic diseases, at the hundreds of Community Health Centers funded by the Bureau of Primary Health Care.

Cool. If only we had known that there's no need for all this talk about lack of affordable health care. My neighbor who died from breast cancer could have gotten the $12,000-per-treatment chemo at the local clinic, no doubt, for some more affordable cost instead of paying out of pocket, despite what she was told. Amazing we waste all this time worrying.

Or maybe this system isn't really all Jason makes it out to be.

Posted by: Sanpete | Jun 23, 2007 10:19:04 PM

Forty-seven states have mandatory insurance laws. In those states, if a private insurer won't insure you, you must purchase insurance from the state-established risk pool, a private entity funded by a levy on insurers. So, unlike health care, in auto insurance there is an insurer of last resort that must take you.

PS- I can't imagine why anyone thinks our system of auto insurance is "reasonably successful." Most people are grotesquely underinsured given the damage they can cause. Most people who are hurt are not fairly compensated. And the tort system in which accidents are adjudicated is horrifically inefficient and arbitrary. But hey, why should facts get in the way of a good ideological point?

Posted by: Bloix | Jun 23, 2007 10:25:54 PM

My neighbor who died from breast cancer could have gotten the $12,000-per-treatment chemo at the local clinic, no doubt, for some more affordable cost instead of paying out of pocket, despite what she was told.

It would depend on her income. If she had been poor, she would most likely have qualified for free treatment under the federal Breast and Cervical Cancer Prevention And Treatment Act.

But then, who knows if you even really had a neighbor with breast cancer.

Posted by: JasonR | Jun 23, 2007 10:29:22 PM

Isabel,

Yes, you could die as a result of not having health insurance. But you're just not very likely to. For that matter, you could die as a result of not having car insurance. But that isn't very likely either. "No health insurance" does not mean "no health care." Whether or not you die prematurely isn't likely to be determined by whether or not you have health insurance. Other things have a much greater influence.

Posted by: JasonR | Jun 23, 2007 10:39:07 PM

But then, who knows if you even really had a neighbor with breast cancer.

Fuck you, Jason.

Posted by: Sanpete | Jun 23, 2007 10:39:36 PM

You know, there are all sorts of good policy arguments as to why car insurance and health insurance are not the same. Aside from that, I think people don't really like being compared to cars.

On the breast cancer note, the legislation JasonR refers to created an option for states to cover income-eligible people with breast or cervical cancer in their Medicaid programs (if they were diagnosed through the CDC program). There is no similar category for heart disease, diabetes, etc. The idea that community health centers are able to serve the needs of all people who come through their doors, let alone the uninisured, is ludicrous.

Posted by: Fiera | Jun 23, 2007 10:45:17 PM

Hey, Sanpete, I also had a neighbor with breast cancer. She was from Canada. She had to wait so long for treatment from the Canadian health care system that her cancer metastasized and she died. She couldn't afford private treatment in the U.S. on account of the high taxes she had to pay for the health care system that killed her.

Posted by: JasonR | Jun 23, 2007 10:50:35 PM

Neil makes solid points. Another important difference is that car and home insurance are different because they're insuring against a risk that may never materialize. They have the odds down and your rates reflect the level of risk you represent. With health care, it's not a matter of if, but rather of when and how much. That's why my homeowners policy, which I've had for over thirty years without a single claim, costs less per year than health care coverage for my husband and myself, at group rates, costs for a single month.

Posted by: Zenyenta | Jun 23, 2007 10:56:40 PM

Jason,

In a 2005 study, it was determined that 46.2% of bankruptcy filings were related to unpaid medical bills. You don't know what you are talking about as usual.

http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.63/DC1

I am a fairly high income person with a wife and kid (and insurance thank god). In the last fifteen years, we have had 7 surgeries, my child's birth, a couple of broken bones, a few ER visits and a couple of hospitalizations. The bills from these encounters were well north of $300,000. Yet, we would be coonsidered pretty healthy people by most standards. These kind of bills would have devastated most uninsured people and they might have been enough to tip me into bankruptcy had I been uninsured.

The notion, by the way, that you can get free care for most conditions is simply untrue.

Most uninsured people are not poor enough to qualify for Medicaid.

Posted by: Klein's Tiny Left Nut | Jun 23, 2007 11:19:53 PM

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